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A defining moment

Chukwudi recalls her “defining summer” as a sophomore working in a different state: “I had no allowances yet because we had to wait two weeks before we got paid our first paycheck.

“I did have credit card debt [on a card with a] $650 credit limit … because I had to move and make some purchases,” she explains. Although she says all those purchases were “valid and warranted” with “no excessive spending” involved, she ended up maxing out her credit card.

For the first time ever, Chukwudi couldn’t pay her phone bill — a “stressful experience” for someone who grew up saving “rainy day” phone credits in Nigeria so that she could always make a phone call if there was an emergency.

She recalls: “I remember telling myself: 'I never want to experience this again. I don't know what this is. I know everything that led me here was valid and this was just temporary because we're going to get paid in a few days.' But that whole experience was a solid reminder that: 'Hey, you need to take care of your finances, you need to be intentional about it.’”

Now, with her public platform from pageantry, Chukwudi is on a mission to help Americans develop their financial literacy and engage more intentionally with their money.

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Credit card debt crisis

Chukwudi’s brush with credit card debt is something that most Americans can relate to today.

U.S. household debt rose by $16 billion to reach $17.06 trillion in the second quarter of 2023, according to the New York Fed’s Quarterly Report on Household Debt and Credit, as people struggle to cope with inflation, elevated interest rates and the high cost of living.

Credit card debt specifically jumped by $45 billion to a record high of $1.03 trillion and the rate of new credit card delinquencies hit 7.2% in the same period, passing pre-pandemic levels.

“I think we ignore how expensive it is to finance credit cards,” says Chukwudi. “If you're not meeting your payments — even if you're meeting the minimum payments — you're still paying extra.”

She’s referring to the high interest rates on credit cards at the moment — thanks to the Federal Reserve’s 11 interest rate hikes since March 2022 in an effort to tame rampant inflation.

The current average credit card APR is 24.37%, according to LendingTree data — the highest rate since the firm began tracking rates in 2019 — but someone with a crummy credit score could face a rate as high as 27.79%.

Chuckwudi says that in order to build wealth, you need to pay down your debt — “especially the high interest yielding debt” — a lot of which is tied to credit cards.

Pay down your debts

The first step to paying off debt, according to Chuckwudi, is to “come up with a plan.” You don’t have to pay everything down at once; instead, she advocates for taking “baby steps.”

“The same way it takes baby steps to save — and before you know it, you've saved $20,000 — is the same way it takes baby steps to pay down those debts,” she says. “Come up with a plan and [ask yourself]: ‘What makes the most sense?’ Maybe it's $200 every month towards my $2,000 credit card bill.”

There are several methods you can use to pay down your debts, including the popular debt snowball and debt avalanche methods. To succeed, you’ll need to stick to a budget that breaks down your monthly income into necessities, wants, savings and debt repayments.

To help you stay on your payoff track, Chukwudi emphasizes the importance of building an emergency fund so you can deal with any surprise expenses that might arise. The amount of money you need in an emergency fund can vary depending on where you live and what your common expenses are. Chukwudi likes to stash away three to six months worth of living expenses.

She also preaches patience as debt doesn’t just disappear overnight, unless you come into a financial windfall or you win the lottery. These days, young people feel the pressure to get rich quick and buy a home, but Chukwudi says it’s important to get your financial house in order first — starting with building an emergency fund and paying down your debts.

“There’s different steps,” she adds. “You can’t jump steps just because you want to see quick results.”

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About the Author

Bethan Moorcraft

Bethan Moorcraft

Reporter

Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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